Modern Labor Economics : Theory and Public Policy

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This text is the product of the authors' three decades experience in teaching labor market economics and conducting research aimed at influencing public policy. The authors develop the modern theory of labor market behavior, summarize empirical evidence supporting or contradicting each hypothesis, and illustrate the usefulness of various theories for public policy analysis. Theory is presented within context nontraditional, business, historical, and cross-cultural through numerous detailed policy examples in each chapter. This thoroughly revised Ninth Edition includes updated material throughout, plus new chapters on frictions in the labor market, and a new boxed feature focused on empirical techniques.

Preface

xvii

Introduction

1

(24)

The Labor Market

2

(1)

Labor Economics: Some Basic Concepts

2

(10)

Positive Economics

3

(1)

The Models and Predictions of Positive Economics

4

(3)

Normative Economics

7

(3)

Normative Economics and Government Policy

10

(2)

Plan of the Text

12

(13)

Example 1.1 Positive Economics: What Does It Mean to ``Understand'' Behavior?

5

(11)

Appendix 1A Statistical Testing of Labor Market Hypotheses

16

(9)

Overview of the Labor Market

25

(34)

The Labor Market: Definitions, Facts, and Trends

26

(9)

The Labor Force and Unemployment

27

(3)

Industries and Occupations: Adapting to Change

30

(1)

The Earnings of Labor

30

(5)

How the Labor Market Works

35

(12)

The Demand for Labor

36

(4)

The Supply of Labor

40

(2)

The Determination of the Wage

42

(5)

Applications of the Theory

47

(12)

Who Is Underpaid and Who Is Overpaid?

47

(6)

International Differences in Unemployment

53

Example 2.1 The Black Death and the Wages of Labor

45

(5)

Example 2.2 Ending the Conscription of Young American Men: The Role of Economists

50

(2)

Empirical Study Pay Levels and the Supply of Military Officers: Obtaining Sample Variation from Cross-Section Data

52

(7)

The Demand for Labor

59

(34)

Profit Maximization

60

(3)

Marginal Income from an Additional Unit of Input

61

(2)

Marginal Expense of an Added Input

63

(1)

The Short-Run Demand for Labor When Both Product and Labor Markets Are Competitive

63

(7)

A Critical Assumption: Declining MPL

64

(1)

From Profit Maximization to Labor Demand

65

(5)

The Demand for Labor in Competitive Markets When Other Inputs Can Be Varied